Charts, maps and infographics

Measuring economic sentiment

Falling BRICs

ECONOMISTS, observed Keynes, ought to be like dentists: humble and competent. But there is another parallel, suggests Hal Varian, Google's chief economist. Just as a man only thinks of the dentist when he has a toothache, so too does he care most about the economy when it also is painful.

By that standard, as signs mount of wobbles in the BRIC economies (Brazil, Russia, India and China), what are the sentiments of the people themselves?

To answer that question, Graphic detail has turned to Google Insight, the statistical tool by which one can see the relative changes in specific search queries over time (and can break it down by locations, time, etc). The correlations are utterly unscientific: they simply gauge searches; the rest is one's interpretation.

Thus, plotting the rise and fall of the term "economic slowdown" may or may not be an accurate indicator of public sentiment: people concerned about the economy probably don't search using such obvious, generic terms. But figuring out the right set of terms is hard. (Google Flu Trends, which found a strong correlation between searches and actual flu cases in America, needed to plough through 450 million mathematical models.) Meanwhile, the best predictor for the economic downturn in 2009 were searches for coupons and rebates.

However, when Graphic detail embraced Keynes' dictum and examined searches for "economy" in the BRIC countries over the past eight years, the results were perplexing. The frequency fell in all four countries in a roughly linear way, and in three cases with a consistent pattern. We used the term "economy" in the local language, as shown on the charts along the side, but used "economy" in English in India, since that is far more commonly used than the Hindi variants. (Click on the charts to go to the actual Google Insight data.) Why should this pattern occur? The charts show searches generally falling in the winter and summer (when they reach a nadir) and increasing in Spring and autumn.

In his lectures describing Google Insight (such as at the University of California, Berkeley last June), Mr Varian notes that the data are not raw query counts but a "normalized query share"—that is, a fraction of queries relative to the total number of queries, placed on a scale to 100.

So are searches for Lady Gaga crowding out queries on the economy? There might be a little bit of that as the web extends to more aspects of everyday life, particularly in developing countries. But it is hard to think that this should explain the dramatic declines, and it certainly does not explain the regularity of the variance. Perhaps it is explained by businessmen, government officials, professors and students, who suspend work during the winter holidays and take long breaks over the summer? (After all, searches in America for "civil war" seems to be correlated with when student essays are due.) This might explain the variance, but not the decline.

If readers know why this happens, please leave a comment. Graphic detail will query Mr Varian for his explanation as well.

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Update (August 26th 2012): Mr Varian's reply appears in the post BRIC-a-brac on August 8th. Also, we originally misdescribed Keynes's parallel between economists and dentists in the first paragraph, which has since been corrected. (Cf: "If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid." Keynes, "The Future" Ch. 5, Essays in Persuasion (1931).)

I work as an editor at O Globo, one of Brazil's largest dailies. At least in our case, the answer could actually be quite simple: full employment. And credit availability.
In May, we had record sales of cars.
I'm well aware that other indicators are not that great. There are too many cars still in stock and production is naturally slowing down. Real estate prices are high here in Rio and in Sao Paulo (although those prices are falling a bit), groceries are expensive, the rate of debt's been growing and GDP will not grow as much as it has in recent years.
But, really: the best employment numbers in recent history? Why would the average citizen have any reason to distrust the economy?

After playing around with Google Insights for a few minutes, I have come to the conclusion, that your 'Lady Gaga theory of the internet' is correct. Here are the search queries I have checked grouped according to their growth:

I think the most likely explanation is that these countries have seen a widening of the demographic using the internet from wealthy early adopters to mass market mobile searchers today. The early adopters would have been more likely to search for 'economy' due to vested or academic interests but as the internet and search become more mainstream, the internet population as a whole is less likely to search for them. The numbers of actual searches has probably remained stable.
I've been talking about and collecting these search data insights for a couple of years now, http://searchinsights.wordpress.com and love the debate around the interpretation of results that springs up.

The idea behind the graphs is great!
Does the clear trend not have more to do with the evolving and growing audience of Google searchers more than the subject of the search itself?
Living in an emerging market myself I know that not everyone has access to the internet. In 2005 the number of people using the net was much less and the demographic of folks using the internet for more than email was very, very different to today's. Today's demographic is younger, less educated, more multiracial and has a much higher percentage non-professionals. Today the majority of people access the net on their mobile device and have no regular access to a computer.
Searching for key words like "loan" or "interest rate" or "invest" (similar words and their derivatives) relative to each other may produce better results in the emerging markets. It's a pity Google hasn't been around since 1995 so a similar picture could be drawn of the States, UK and Europe to see if the above observation has any merit in the development of the net there.

There may be some truth in your lady gaga theory. The internet penetration has been increasing steadly over the years - which makes a wider base. I searched for "movies" and "trains" in India - both of these have been trending up.
Also "Indian Economy" is hardly the seach keyword for the populace worried about a slowdown. It seems more likely fired by pedantically oriented people.

In Spain, searches for the term "burbuja inmobiliaria" (housing bubble in Spanish) peaked in 2007 (0 to 10), about one year before bubble popped. Is Google trend an indication that regular people are "smelling" something wrong in the housing market?

I would guess that it's a result of information being more widely available -- if you're hearing about the economy on the tv or in newspapers or in daily conversation, you have less need to google the phenomenon.

There is another way to estimate traffic at least in Russia where Google is NOT the dominant search engine. Yandex Wordstat tool gives the absolute numbers of search queries for a certain keyword as well as relative numbers compared to all search queries.

Yandex shows that in the period of June 2010 - May 2012 relative numbers for economy (экономика) have been going down but in absolute numbers there's no such decline.

I agree with the explanation for variance (mainly due to holidays), and maybe Lady GaGa is really crowding out the total number of searches and pushing the normalized value down. The Web is extending to more aspects of day-to-day life but my hypothesis is that maybe with recent economic development the total number of lower income class citizens which have gained access to computers and furthermore the internet throughout the recent years has added to that, and here I'm assuming that lower income classes are more interested in other keywords rather than 'economy' than higher income classes.

Increasing internet penetration (and hence increasing number of search queries) could be one element of the decline. The graphs show the local search term for "economy" as a percentage of total searches. I would not be surprised if new internet users in the BRICs search less frequently for this term than existing users.

Could it be that those searching for the term are likely to be those interested in making money off it? I can imagine that when times are good, everyone wants to keep tabs on the stock indices and GDP numbers. Remember the story about Joe Kennedy's shoeshine boy giving him stock tips? What you are seeing is probably that phenomenon wearing off.